[Analytical Perspectives]
[Other Technical Presentations]
[19. Relationship of Budget Authority to Outlays]
[From the U.S. Government Printing Office, www.gpo.gov]


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             19. RELATIONSHIP OF BUDGET AUTHORITY TO OUTLAYS

  Budget authority is the authority provided by law to incur financial 
obligations that will result in outlays. \1\ Budget authority must be 
provided in laws, in accordance with Article I, Section 9, of the 
Constitution: ``No money shall be drawn from the Treasury, but in 
Consequence of Appropriations made by Law...'' Hence, Federal agencies 
cannot obligate the Government to make outlays until budget authority 
has been provided to them by appropriation.
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  \1\ The relationship of budget authority, obligations, and outlays is 
discussed generally in Chapter 24 of this volume, ``Budget System and 
Concepts and Glossary''; for most individual budget accounts, this 
relationship is traced in a ``program and financing'' schedule [table] 
in the budget Appendix volume.
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  New budget authority for most Federal programs is provided in 13 
annually enacted appropriations acts. \2\ However, new budget authority 
for more than half of all outlays is made available through permanent 
appropriations under existing laws. These permanent appropriations take 
three main forms. The first is budget authority for trust funds, which 
for most trust funds is automatically appropriated under existing law 
from the available balance of their receipts and equals the estimated 
annual obligations of the funds. The second is interest on the public 
debt, for which budget authority is automatically provided under a 
permanent appropriation enacted in 1847 and equals interest outlays. The 
third is the authority to spend offsetting collections credited to 
appropriation or fund accounts.
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  \2\ Some or all of the 13 ``regular'' appropriation bills have 
sometimes been consolidated into a few acts or a single act.
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  Not all of the new budget authority for 2004 will be obligated or 
spent in 2004: \3\
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  \3\ This subject is also discussed in a separate OMB report, 
``Balances of Budget Authority,'' which can be purchased from the 
National Technical Information Service shortly after the budget is 
transmitted and is available on the internet, with the other budget 
documents.
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    Budget authority for most trust funds comes from the 
          authority of these funds to spend their receipts (limited, in 
          most cases, by the estimated obligations). Any unexpended 
          balances remain available to these trust funds indefinitely in 
          order to finance benefits and for other purposes specified by 
          law.
    Budget authority for most major construction and procurement 
          projects covers the entire cost estimated when the projects 
          are initiated, even though work will take place and outlays 
          will be made over a period extending beyond the year for which 
          the budget authority is enacted.
    Until the 1998 budget, budget authority for large portions 
          of the subsidized housing programs was equal to the 
          Government's estimated obligation to pay subsidies under 
          contracts, which extended for periods of up to 40 years. New 
          budget authority is now appropriated year-by-year for renewal 
          of these contracts as they expire. For many years into the 
          future, however, some of the outlays under these programs will 
          continue to originate from budget authority enacted in 1997 
          and earlier years.
    New budget authority for most other long-term contracts 
          covers the estimated maximum obligation of the Government.
    Budget authority for most education and job training 
          activity is appropriated for school or program years that 
          begin in the fourth quarter of the fiscal year. Most of these 
          funds result in outlays in the year after the year of 
          appropriation.
    Government enterprises are occasionally given budget 
          authority for standby reserves that will be used only in 
          special circumstances.
  As a result of these factors, a substantial amount of budget authority 
carries over from one year to the next. Most of this is earmarked for 
specific uses and is not available for new programs. A small part may 
never be obligated or spent, primarily the amount for contingencies that 
do not occur or reserves that never have to be used. Also, some budget 
authority results in an exchange of assets for which no corresponding 
outlays are scored; budget authority backing International Monetary Fund 
arrangements to resolve international monetary crises is an example.
  As shown in the following chart, $421 billion of the outlays in 2004 
(19 percent of the total) will be made from budget authority enacted in 
previous years. At the same time, $436 billion of the new budget 
authority proposed for 2004 (19 percent of the total amount proposed) 
will not lead to outlays until future years. Although outlays in 2004 
are, coincidentally, very nearly equal to budget authority for that year 
(99.4 percent), this coincidence only occurs because the prior-year 
authority that will produce 2004 outlays ($421 billion) nearly equals 
the new 2004 authority that will not be spent until future years ($436 
billion). Thus, in general, the total budget authority for a particular 
year is not directly indicative of that year's outlays, since it 
combines various types of budget authority that have different short-
term and long-term implications for budget obligations and outlays.

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